Another $2 trillion down the drain

A trillion here, a trillion there, pretty soon you’re talking real money….

I just read a Yahoo news story (taken from Reuters I think) which outlines the new bank bailout presented today by U.S. Treasury chief Tim Geithner.  In case you didn’t notice, the stock market didn’t take kindly to it, dropping almost 400 points today.   You’d think they’d learn – stocks also tanked back when the original bailout plan was passed in October 08.  Obviously, doing the same thing again isn’t going to work.

The story is short on details and – while I’m perfectly capable of doing simple math – I don’t see how they came up with the $2 trillion number.  I’ll investigate more later, but here’s part of the story.

A centerpiece of the renamed “Financial Stability Plan” is a proposal to set up a public-private investment fund, in partnership with the Federal Deposit Insurance Corp, a bank watchdog, and the Federal Reserve, the U.S. central bank.

Seeded with public money, it would leverage up to $500 billion — and possibly as much as $1 trillion — so that toxic assets can be purged from a weakened banking system.

Geithner told an invited audience at the U.S. Treasury that $50 billion in federal rescue funds will be used to try to stem home foreclosures and soften the crushing impact of the deep housing crisis now afflicting the entire economy.

The plan would also expand a Fed program aimed at expanding credit card, student, auto and small business lending.

The facility will grow from its current $200-billion limit to up to $1 trillion, thanks to a jump in Treasury funding to $100 billion from $20 billion. The lending program would be extended to cover a range of mortgage-related assets.

The Senate also passed a massive $838 billion stimulus package today – you can “stimulate” a lot of  “massive packages” for $838 trillion!  (I know it’s lame, but someone had to say it because we’re all getting screwed.)

Buy gold and silver.

More to come when I find more details.

gk

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